Non-compete Agreements and Doc-Napping

A geographic pos-employment restrictive covenant is often called a “noncompete clause” in a contract stating you are unable to work within a specified number of miles for a specified number of years should you resign or be terminated by your employer.

These clauses apply when one group of physicians lose the business at a healthcare facility to another group but also to keep groups from recruiting and employing physicians already on site at the facility to negate their agreements and go to work for the new contract group.  This tactic may be encouraged behind the scenes by the facility and you, the physician, become a pawn in the game.

Emergency department physicians are somewhat different than those physicians in private practice. Unlike Obstetricians or orthopedists, emergency physicians do not have a patient practice or referral list that would follow them to a new group or facility.  An emergency physician would not have access to a facility’s information that could be considered proprietary or trade secrets and is not offered any specialized training from their employer. These principals are the most common for supporting restrictive non-compete contract clauses.

Essentially, the transitioning of the physicians of a replaced group (doc-napping) to the payroll or the succeeding physician group or healthcare facility, who then derives the benefits that flow from the transition (profits), without incurring the original cost of recruitment and selection can be the crux of a legal complaint of tortious interference, unjust enrichment, conspiracy, breech of contract and/or fraud. Individual states do not agree on the basis of such complaints and each state may rule differently dependent upon the state law/philosophy.

This was demonstrated two years ago in the fiasco between Summa Health and U.S. Acute Care Solutions (USACS). The independent group staffing the Summa Health Emergency Department and its residency in Akron, Ohio were replaced by USACS in January, 2017 with minimal notice sending the residents flying in disarray finding new programs.  In trying to save the program, USACS hired someone with a restrictive covenant clause against working in another hospital within a 10 mile radius for one year. Ohio is not a state that the courts have generally supported non-compete agreements.  The suit was settled out of court for an undisclosed amount of money.

If you become a contractor with the federal, state, or local governments, you will find that this doc-napping or temp-napping can become quite common.  There is no protection from the transfer of professionals from one group or business to another. In many instances, the contracting officers who write the contracts according to governmental guidelines are not aware of the favoritism that the buyers or purchasing departments award to individual contractors. It is a difficult situation fraught with hidden dangers.

Practice rights for physicians, regardless of specialty, are subject to restrictive non-compete covenants written into contracts to prevent disintermediation. Disintermediation is the elimination of the middleman, in this case, the group. It is the taking advantage of the situation to deprive one of a profit and for the other to obtain that profit unjustly and unearned.  Is it reasonable to have a restrictive covenant as to employer location and for a short period of time? And what about the ethics of such actions? Is it ethical to violate the restrictive covenants?

As physician groups become more of a commodity to the business of healthcare delivery by large corporate entities that gobble up the smaller institutions and facilities.  We can expect that more protections for the contractor will be added to the provision of service contracts.

Read the small print! It’s more important than ever.

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